Asian investment capital requirements for petroleum have been estimated by any number of sources to range up from $20 to $30 billion in the decade ending in 1987, and the offshore supply and service industry's real growth is expected to average from 6% to 7% Per year as a result of this spending. Those active in the Asian oil business have perhaps heard these rosy figures - or ones similar to them - for some time, but if their rigs are idle these figures will bring them little comfort. The inability to spot the signals indicating potential turning points in these otherwise sanguine forecasts or even to expect any turning point has certainly been a factor in the overplanning for what has turned out to be a lower than expected level of Asian petroleum activity in the 1970's. Throughout this period the focus has always been on a thing called "capital requirement" - a kind of capital demand number. But It must be apparent that comments on capital requirements have little meaning in the absence of some reference to the availability of capital supply. Capital supply is usually taken for granted, and by building upon assumption on petroleum consumption, inflation and other factors, the numbers on the requirements or uses of capital overwhelm considerations of sources of capital. A view of the active record outlays in the Asian countries can help bring perspective to the problems of adequate sources of capital and perhaps relate the growing intensity of capital spending per unit of oil or gas added. Capital sources have been largely internal with respect to spending in Asian oil and gas plays and from 1970 through 1977 these outlays totaled over 57 billion. plays and from 1970 through 1977 these outlays totaled over 57 billion.

Observations on the Capital Source Mix: Private and Public

Sources of capital available for oil and gas opportunities throughout the Asian area to date have been traditional in origin, in that companies in the private sector have been the dominant capital spenders. Predominantly, the credit worthiness of the private company was behind most of the net capital exposed at risk in Asian oil and gas operations. In the past, internal sources of capital dominated spending levels in past, internal sources of capital dominated spending levels in Asian markets by petroleum companies. The future, however, may look somewhat different. The mix of new capital allocated toward oil and gas activity in Asia may be increasingly weighted toward public sector sources such that within a decade, the credit worthiness of countries or quasi-public entities may be as important as the conventional credit worthiness of private petroleum companies. In addition, greater emphasis on petroleum companies. In addition, greater emphasis on project-by-project financing may prevail in the future. This outlook is project-by-project financing may prevail in the future. This outlook is coincident with the changing role of the national oil and gas companies and active development of Asian governmental energy departments and petroleum ministries, along with the rising coat of petroleum activity, especially that for natural gas. What we expect to remain familiar is the continuation of technical and managerial service relationships between the private sector and state petroleum entities. The private oil field private sector and state petroleum entities. The private oil field equipment, service and drilling segment will also find that given the greater public/private mix of future oil and gas plays. the derived demand for their services will expand at a faster pace in sales and service to direct governmental entities. This raises interesting and new questions about the stability of levels of spending on oil and gas exploration, development and production in the Asian area for the next decade. production in the Asian area for the next decade. A look at the overall level of petroleum related spending since 1970 may be helpful. Indeed, it is well to note that "sources of capital" mean different things to different segments of the petroleum industry. The offshore driller and equipment supplier petroleum industry. The offshore driller and equipment supplier is primarily concerned with the determinants of investment in Asian offshore and onshore exploration development and production. The size of the cash stream potentially available to production. The size of the cash stream potentially available to this sector in Asia is a direct result of what economists refer to as the multiplier effect of petroleum company and state oil company investment outlays.

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